American Express 2015 Annual Report Download - page 14

Competitive Advantages of Our Closed-Loop Network and Spend-Centric Model
We believe our “closed-loop” network and “spend-centric” business model continue to be competitive advantages
by giving us the ability to provide differentiated value to Card Members, merchants and our card-issuing partners.*
Wherever we manage both the acquiring relationship with merchants and the card-issuing side of the business,
there is a “closed loop,” which distinguishes our network from the bankcard networks, in that we have access to
information at both ends of the card transaction. We maintain direct relationships with both our Card Members (as a
card issuer) and merchants (as an acquirer), and we handle all key aspects of those relationships. Through contractual
relationships, we also obtain data from third-party card issuers, merchant acquirers and processors with whom we do
business. This “closed loop” allows us to analyze information on Card Member spending and build algorithms and
other analytical tools that we use to underwrite risk, reduce fraud and provide targeted marketing and other
information services for merchants and special offers and services to Card Members through a variety of channels,
while at the same time respecting Card Member preferences and protecting Card Member and merchant data in
compliance with applicable policies and legal requirements.
Our “spend-centric” business model focuses on generating revenues primarily by driving spending on our cards
and secondarily by finance charges and fees. Spending on our cards, which is higher on average on a per-card basis
versus our competitors, offers greater value to merchants in the form of loyal customers and higher sales. This
enables us to earn discount revenue that allows us to invest in value-added services for merchants and Card Members.
Because of the revenues generated from having higher-spending Card Members, we have the flexibility to invest in
attractive rewards and other benefits to Card Members, as well as targeted marketing and other programs and
investments for merchants, all of which create incentives for Card Members to spend more on their cards and
positively differentiate American Express cards. The significant investments we make in rewards and other compelling
value propositions for Card Members incent card usage at merchants and Card Member loyalty.
The American Express Brand
Our brand and its attributes — trust, security and service — are key assets of the Company. We continue to focus
on our brand, and our products and services are evidence of our commitment to its attributes. Our brand has
consistently been rated one of the most valuable brands in the world in published studies, and we believe it provides us
with a significant competitive advantage.
We believe our brand and its attributes are critical to our success, and we invest heavily in managing, marketing,
promoting and protecting it. We place significant importance on trademarks, service marks and patents, and seek to
secure our intellectual property rights around the world.
U.S. CARD SERVICES
We offer a wide range of card products and services to consumers and small businesses in the United States. Our
consumer travel business, which provides travel services to Card Members and other consumers, complements our
core card business. We also operate a coalition loyalty business in the U.S. called Plenti and offer deposit products
directly to consumers through American Express Personal Savings.
The proprietary card business offers a broad set of card products, rewards and services to acquire and retain
high-spending, creditworthy Card Members. Core elements of our strategy are:
• Designing card products with features that appeal to our target customer base in traditional and newer
customer segments
• Using incentives to drive spending on our various card products and generate loyal customers, including our
Membership Rewards®program, cash-back reward features and participation in loyalty programs sponsored by
our cobrand and other partners, such as Delta SkyMiles®
• Providing an array of other benefits and services across card products to address travel and other needs
• Driving spending in online and offline channels and accommodating spending wherever and however Card
Members desire
• Developing and nurturing wide-ranging relationships with cobrand and other partners
* The use of the term “partner” or “partnering” does not mean or imply a formal legal partnership, and is not meant in
any way to alter the terms of American Express’ relationship with third-party issuers and merchant acquirers.
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